1214621 Ontario Inc. (VIP Nite Club) v. City of Windsor, 2021 CanLII 122398

Issue Date: November 26, 2021 Case No(s).: LC160037

Proceeding Commenced Under subsection 26(b) of the Expropriations Act, R.S.O. 1990, c. E.26, as amended

Claimant: 1214621 Ontario Inc. (VIP Nite Club) Respondent: City of Windsor Subject: Land Compensation Property Address/Description: 131 Riverside Drive West Municipality: City of Windsor OLT Case No.: LC160037 OLT File No.: LC160037 OLT Case Name: 1214621 Ontario Inc. (VIP Nite Club) v. Windsor (City)

Proceeding Commenced Under section 20 of the Ontario Land Tribunal Act, 2021, S.O. 2021, c. 4, Sched. 6

Request by: City of Windsor Request for: Request for an Order Awarding Costs Costs sought against: 1214621 Ontario Inc. (VIP Nite Club) Municipality: City of Windsor OLT Case No.: LC160037 OLT File No.: LC160037 OLT Case Name: 1214621 Ontario Inc. v. Windsor (City)

Heard: November 2, 2021 by video hearing ("VH")

Appearances

Parties	Counsel
City of Windsor ("City")	P. Brode / A. Nathani
1214621 Ontario Inc. cob as VIP Nite Club Restaurant ("Claimant")	D. Gatti

Decision Delivered by Blair S. Taylor and Order of the Tribunal

Introduction

1The Tribunal heard a Motion for Security for Costs brought by the City in the amount of $100,000.00 in anticipation of a 6 day hearing on the merits set down to commence on Monday, March 7, 2022.

Decision

2For the reasons set out below, the Tribunal dismisses the Motion and orders that costs of this motion are reserved to the Member hearing the matter.

City's Motion

3The City's Motion Record is found at Exhibit 1 and the Motion is for:

(a) an Order that the Claimant provide security within 15 days in a form and satisfactory to the City in the amount of $100,000.00 for costs up to and including the hearing;

(b) the cost of this Motion to be paid by the Claimant within 30 days; and

4The grounds of the Motion are that the Claimant is an Ontario numbered company whose sole business activity was operating the VIP Nite Club Restaurant in the City of Windsor from 1997 to 1999, where it had leased premises at 131 Riverside Drive which property ("Subject Lands") the City had expropriated in 1999.

5The Motion pleads inter alia that: the Claimant ceased to conduct business in 1999; there were two outstanding executions to the provincial and federal governments for back taxes; and the landlord had instigated an action for payment of unpaid rent. The Motion asserts that there is no evidence that the Claimant ever satisfied the above claims while there is evidence that it never relocated its business or conducted any business in the past 20 years or has any assets of any kind. Thus paragraph 3 states the following:

There is good reason to believe that it has insufficient assets to pay a potential cost award to the respondent city.

The Claimant is not impecunious and an order for costs would not prevent it from advancing its claim or cause an injustice.

6The City's grounds include the fact that the Claimant has funded litigation to quash a previous Order of Dismissal, to proceed with a new claim, and that some expert witnesses have been retained in anticipation of the forthcoming litigation.

7The City claims that the Claimant cannot hide behind the corporate veil to avoid its financial obligation while it appears that it has financial resources to do so.

8The City claims that the Claimant cannot demonstrate a real possibility of success to avoid costs because the Claimant has waited for 17 years before bringing the claim to the Tribunal and that the decision in and by the Ontario Municipal Board (the Tribunal's predecessor) in 2002 ruled that there was no leasehold advantage and the landlord was entitled to the entire market value of the property.

Response

9Exhibit 2A and 2B contain the Claimant's Response in which it notes that the Claimant has commenced a proceeding before the Tribunal to be compensated by the City for the leasehold advantage that it had when its leasehold interest was expropriated by the City.

10The Claimant submits that the City is now moving for an Order for Security of Costs in an attempt to chill the proceeding irrespective of the fact the Claimant's claim has merit and irrespective of the fact that the City's Motion lacks the required content to demonstrate to the Tribunal that security of costs would be appropriate in the matter.

11The Claimant's Response notes that: firstly the Claimant's interest was expropriated by the City on April 29, 1999; and secondly the City's expert, Ray Bower, prepared a formal Appraisal Report dated July 20, 1999 which dealt with the landlord's interest in the expropriated property and the Claimant's interest and the latter of which Mr. Bower valued as of the date of expropriation at $50,000.00 (being the market rent advantage of the Claimant). The Claimant's Response includes the full Bower Report.

12The Response provides that it was the Claimant's lawyers (Miller Canfield LLP), who retained two experts and each expert has found that the Claimant has a market rent advantage and valued the market advantage at $210,000.00 and $264,000.00 respectively, and the Response attaches both expert reports.

13The Claimant's Response notes that as of the date of the Motion, the only expert evidence that is available to the Tribunal is from the City's expert, Mr. Bower, and the Claimant's two experts, all of whom found a market rent advantage for the Claimant and based on that evidence, the only issue to be decided is the value of that market rent advantage.

14The Claimant's Response specifically argues that as of the date of the Motion, the City has not provided any report that the Claimant did not have a market rent advantage, nor has the City provided any opinion or report that suggests or states that the City's 1999 expert, Mr. Bower, was mistaken in his report.

15The Response notes that the landlord had a hearing before the Ontario Municipal Board in or about 2002, at which time the Claimant's status was addressed. In that Decision, the Board stated: "The Board is satisfied that a claim if made by the VIP Nite Club and Restaurant, could form the basis of a separate claim."

16The Claimant's Response provides that a claim was commenced by the Claimant by serving a Notice of Arbitration and Statement of Claim dated February 2, 2007. That Claim did not move forward due to inaction by the then counsel for the Claimant and the Ontario Municipal Board ultimately and administratively dismissed the proceeding in 2011.

17In or about September of 2016, the Claimant served and filed a second Notice of Arbitration and Claim seeking compensation for its market rent advantage. The City filed a Reply and alleged its claim was barred by issue estoppel: a form of res judicata.

18The Claimant disagreed and moved for an Order that the prior administrative dismissal did not bar the Claimant from bringing a fresh claim for compensation, which Motion was successful.

19The Response also pleads that as of the date of the Motion, the parties have exchanged pleadings, affidavits for discovery, have completed examinations for discovery, have fulfilled undertakings, and have participated in telephone conference calls with the Ontario Land Tribunal, which resulted in the issuance of a Procedural Order.

20The Claimant's Response states that a hearing of this matter was originally set to take place on January 12, 2021 but was adjourned to July 12, 2021 at which the City requested an adjournment as the City required more time to retain one or more experts and this was unopposed by the Claimant.

21The Response notes that by not opposing the City's request for an adjournment for the hearing scheduled for July 12, 2021, the Claimant now finds itself in a position where due to the Motion by the City, it may not be able to move forward with the hearing unless it is able to come up with $100,000.00 to be as security for costs of the City.

22The Claimant takes the position that the City's Motion must fail on the grounds that it lacks both merit and content, and further that the security requested by the City is already in the City's possession.

23The Response notes that the Court in 2311888 Ontario Inc. v. Ross 2017 ONSC 1295 found that if a defendant is able to satisfy the Court that one of the numerated sections in Rule 56 of the Rules of Civil Procedure applies, then the plaintiff has the ability to show that granting such an order would be unjust. In the same case, the Court went on to say that the claimant may meet the onus by establishing to the Court that either the plaintiff has sufficient assets to pay an order for costs, that the plaintiff is impecunious or that the plaintiff's claim has a good chance of succeeding on its merits.

24In light of the evidence before the Tribunal at this time, the Response argues that there are three expert reports, all of whom agree that there was a market advantage to the Claimant and that the only outstanding issue is value of the Claim.

25The Response also points out that having held the market advantage since 1999, there would be a level of interest which would value the rent advantage found by Mr. Bower at approximately $80,000.00 in 2021 and this would be sufficient security to offset any costs against the Claimant.

Reply

26The City filed no formal Reply, but did file the Divisional Court Decision in Shergar Development Inc. v. Windsor (City) 2019 ONSC 2623 ("Shergar") which was an appeal by Shergar Development of a rehearing decision of the Ontario Municipal Board arising out of a 1998 expropriation by the City, where the Ontario Municipal Board found that Shergar Development's interest in the lands expropriated was similar to $266,832.32 and that amount was less than the City's formal offer of compensation in the amount of $1,208,155.98. The Tribunal denied its costs based on the 85% rule from the date the offer was made by the City.

Rule 56 The Rules of Civil Procedure

27The Motion is based on Rule 56.01.1(d) which states as follows:

The Court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that, ...

(d) the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent.

Chronological Extracts

28The Tribunal relies on the following chronological extracts as forming the basis for its decision in this matter.

The Claimant occupied and used part of the premises at 131 Riverside Drive West in the City as a bar and restaurant pursuant to a lease dated February 1, 1997.
All interests in the land at 131 Riverside Drive West were expropriated by the City on April 29, 1999.
The City issued a Notice of Possession to the Claimant to vacate the premises by August 16, 1999 but that was extended until September 25, 1999 at the request of the Claimant.
Ray Bower Appraisal Services Inc. prepared an Appraisal Report dated July 20, 1999 on behalf of the City and found a rent advantage accruable to the tenant in the amount of $50,000.00 (lease advantage).
During the course of the hearing, counsel for the City admitted that the City had made a Section 25 Offer to the Claimant in the amount of $50,000.00.
On November 16, 1999, the Ministry of Finance notified the City that the Claimant was indebted to the Ministry in the amount of $13,578.19 pursuant to the Retail Sales Tax Act.
That by notice dated September 19, 2001, Canada Revenue Agency ("CRA") advised the City that the Claimant owed $11,138.11 to the CRA.
That a Statement of Claim was issued by 789881 Ontario Inc. against the Claimant for rent and other sums in the amount of $179,155.21.
That on August 15, 2002, the City wrote to the then solicitor for the Claimant stating:

We propose that your clients give evidence in favour of the fact that a valid lease existed between them and 789881 Ontario Inc., the property owners. In demonstrating that a valid lease exists, your clients would provide evidence that they paid rent on a timely basis and they were of the understanding that they had the right to continue to operate under this lease. It is our understanding that your clients maintain this position.

Even though your clients are not parties before the Ontario Municipal Board in this upcoming hearing, the City of Windsor would be willing to recognize any leasehold advantage or value and your clients' rights under the lease that the Board finds exists. Thus, if the Ontario Municipal Board finds, at the end of this hearing, that the leasehold interest belonging to the VIP Nite Club was valued at $50,000.00, the City would recognize this value belongs to your clients, in their claim for compensation against the City.

On December 2, 2002, the Ontario Municipal Board issued its Decision concerning a claim by the Claimant's landlord as a result of the expropriation of the Subject Lands.
At page 20 of that Decision under the heading "Findings Respecting the Market Value Claim", the Board found the following:

The Board finds no lease advantage that needs to be deducted or considered in arriving at the Claimants' interest. The Board is satisfied that a claim, if made by the VIP Nite Club and Restaurant, could form the basis of a separate claim.

On or about February 2, 2007, the Claimant through its former solicitors filed a Notice of Arbitration and Statement of Claim for the market value of the land expropriated and compensation for damages attributable to disturbance or business loss in the total amount of $400,000.00.
On August 16, 2011, the Ontario Municipal Board administratively dismissed the claim.
On or about September 27, 2016, the Claimant filed a new Notice of Arbitration and Statement of Claim with the Tribunal and the Response by the City was that the second Claim was barred.
On or about October 2, 2015, the Claimant brought an action against the former solicitor for negligence and claiming damages of $500,000.00.
On or about January 21, 2020, counsel for the Claimant filed a Notice of Motion for an Order that the second Claim was not barred by the previous administrative dismissal of the first Claim.
On or about May 22, 2020, the Tribunal issued a Decision ordering that the Motion was granted, and the Claimant's proceeding was not barred by the previous Order of the Tribunal.
A hearing of this matter was scheduled to take place on January 12, 2021 but was adjourned to July 12, 2021.
The July 12, 2021 hearing was adjourned at the request of the City as it required more time to retain one or more experts and the adjournment request was not opposed by the Claimant.
On August 18, 2021, the Tribunal issued a Decision setting down a new 6 days hearing commencing on March 7, 2022 and attached thereto the Procedural Order for the hearing.
The City's Motion Record is dated as of September 15, 2021.

Jurisprudence

29Counsel have provided numerous cases with regard to this matter.

30The City urges the Tribunal to follow the Divisional Court Decision in Crudo Creative Inc. v. Marin 2007 CanLII 60834 (ON SCDC), 90 O.R. (3d) 213 ("Crudo").

31Observing that the test in Rule 56.01.1(d) as to whether it is "just to make an order for security of costs", the Court said that a balancing is essential with due regard to the purpose of affording the defendant a reasonable measure of protection for their costs but also with regard to the potential impact on the plaintiff, and that the Court has always exercised a broad discretion in deciding whether security for costs is just in the circumstances.

32In Crudo, the Court found that there is no evidence that the Rule 56.01 Motion was being used in an oppressive way to stifle or block the respondent's action. Further, as to the merits of the claim, while the appellant submitted that their evidence on the motion raised doubt as to the strength of the respondent's case and its likelihood of success, it could not realistically be said that Crudo Creative's action is "plainly devoid of merit" but that said, the record did not cogently suggest anything approaching a certainty of success for the respondent's conclusion.

33In that case, the Court exercised its discretion and did not order the posting of the full security, but did require a lesser amount of security.

34The counsel for the Claimant directs the Tribunal to two cases: the first being the Canadian Pacific Railway Company v. Windsor (City) [2016] O.M.B.D. No. 90, a decision of the Ontario Municipal Board issued on February 19, 2016 dealing with a City of Windsor Motion for security of costs from Shergar Development. In that case, the Board denied the City's request for costs as the Board found that Shergar Development was not impecunious, it seemed to have sufficient resources to fund the litigation, and that the amount the City sought for security in the amount of $551,093.40 was already entirely in the City's control, as the Section 25 Offer of $500,000.00 had not been paid by the City to Shergar Development and had been held by the City for over 17 years.

35Secondly counsel for the Claimant directs the Tribunal to 423322 Ontario Ltd. v. Bank of Montreal (H.C.J.) 1988 CanLII 4678 (ON HCJ), 66 O.R. (2d) 123 before Justice Granger. There the Bank's Motion was made pursuant to Rule 56.01(a) (ordinarily resident outside Ontario) and (d). Noteworthy in this decision, the Court dealt with the issue of the delay in bringing a Motion of Security for Costs and it referenced Charron v. MacDonald 1938 CanLII 352 (ON HCJ), [1938] O.W.N. 410 where the Master stated the following:

There is, however, a much more serious objection to this motion: namely, the delay in bringing the application. Where the defendant believes that he is entitled to an order for security for costs he should move at the earliest possible moment in order that the plaintiff may know whether or not he will be required to give security and to prevent him from proceeding at very considerable expense down to trial and then find himself faced with an order for security with which he is unable to comply ... The defendant MacDonald should have launched a motion for security for costs immediately after the service of the writ or at the latest immediately after the delivery of the statement of claim.

Justice Granger then observed that it had been more recently held that mere delay in bringing the motion is not fatal and that a plaintiff must show some prejudice occasioned by the delay.

Justice Granger then cited 408466 Ontario Ltd. v. Fidelity Trust Company (1986) 10 C.P.C. (2d) 278 where it is noted that the plaintiff in his affidavit in response to the motion for security for costs stated that the defendants had known for almost seven years that he resided outside of the jurisdiction. Further he stated that he was lulled into a false sense of security by the defendant's delay in bringing the motion.

Justice Granger in his decision states:

Accepting that the action is not frivolous or vexatious and the defendants cannot explain their delay, I am not prepared to order the plaintiffs to provide security for costs as I am convinced on the material that such an order will result in the plaintiffs being unable to continue with these proceedings, I am advised that this action is fixed for trial commencing December 1988.

Justice Granger goes on to cite John Wink Ltd. v. Sico (1987) 1987 CanLII 4299 (ON HCJ), 57 O.R. (2d) 705 ("John Wink") where the Court stated:

There can be no question that an injustice would result if a meritorious claim were prevented from reaching trial because of the poverty of plaintiff. If the consequence of an order for costs would be to destroy such a claim no order should be made.

Further the Court in John Wink had stated:

In my respectful opinion, unless a claim is plainly devoid of merit, it should be allowed to proceed. That is the only "special circumstance" that I would require. While the adoption of this standard might allow some cases to go to trial that the trial will prove should not have proceeded, nevertheless, the danger of injustice resulting from wrongly destroying claims that should have been permitted to go to trial is to my mind a greater injustice.

Justice Granger then found:

In my opinion, having regard to the delay in bringing the motion and the fact that the plaintiffs' action is not frivolous or vexatious and it is founded upon the actions of the defendants which the plaintiff alleged caused its insolvency, I am not prepared to exercise my discretion and order the plaintiffs to submit to an order for security for costs at this stage. If I was (sic) to make such an order it would cause an injustice.

36In response the City cites the Divisional Court case of Shergar in which while the Ontario Municipal Board had denied the City's request for security for costs in a Decision issued February 19, 2016, the rehearing Decision found a lesser quantum of compensation than the City had offered and denied Shergar Development its costs from the date of an offer to settle made on June 2, 2015.

Commentary and Findings

37The Tribunal would first note that this Motion arises from an expropriation. Unlike some of the civil cases cited above, the purpose of the Expropriations Act is to fully compensate an owner who has been expropriated.

38The Tribunal would note that Rule 56 provides that the Court, and in this instance the Tribunal, may on a motion make such order for security for costs "... as is just". The jurisprudence surrounding Section 56 provides that the Court and in this case the Tribunal is clothed with discretion concerning such a motion.

39Moreover, the jurisprudence highlights that a balancing of interests is essential with due regard to the City being afforded a reasonable measure of protection for their costs and the potential impact on the plaintiff.

40The Tribunal has done that balancing of interests and finds that it will exercise its discretion and not order security of costs as it would be prejudicial to the Claimant if the Tribunal were at this late stage in the proceeding to order security of costs in the amount of $100,000.00 for the following reasons.

41Firstly, in the matter before the Tribunal, there are on the record only three opinions of value in evidence. All three are contained within the Claimant's Response (Exhibits 2A and 2B). In Exhibit 2A at Tab C is the Retrospective Market Rental Advantage Report prepared by Metrix Realty Group dated as of May 27, 2021 with a finding of a leasehold advantage of $264,000.00.

42At Exhibit 2A Tab B is the Loss of Tenant Advantage dated August 4, 2020 prepare by Tracey Business Advisors Inc. with a finding of a total loss of income of $210,000.00.

43Finally, there is the Appraisal Report prepared for the Corporation of the City of Windsor by Ray Bower Appraisal Services Inc. dated July 20, 1999, which found a rental advantage accruable to the tenant in the amount of $50,000.00 (the lease advantage).

44Notwithstanding the fact that the parties have had discoveries, have produced documents, have a procedural order issued, and a 6 day hearing on the merits set for March of 2022, there is as of yet, no contrary evidence as to market value before the Tribunal.

45Accordingly, the Tribunal finds, based on the record that exists now, that the Claimant has a prima facie claim for damages supported by three expert reports.

46Secondly, in the City's Exhibit 1 at Tab G, the City has provided a corporate profile for the Claimant which shows the company to be active. The Tribunal notes that the notice of outstanding tax Information from the Province of Ontario is dated as of November 16, 1999 and no update has been provided. With regard to the material from the CRA, it is dated as of September 19, 2001 with no update provided.

47Turning to the claim filed in the Superior Court of Justice by 789881 Ontario Inc. versus the Claimant in the amount of $179,155.21, the Tribunal notes it is simply a claim, issued on September 20, 1999, and there is no evidence before the Tribunal that it ever proceeded beyond a mere claim.

48The Tribunal finds this line of evidence to be over 20 years old, with no updates, and affords it little weight.

49Moreover, the Tribunal is concerned about the timing of this Motion and notes that a hearing on the merits had previously been set for January 12, 2021 which was also adjourned to July 12, 2021 at the request of the City and unopposed by the Claimant.

50A new hearing has been set for March 7, 2022 and the Motion for Security of Costs is only filed as of September 15, 2021.

51The Tribunal finds that this delay in bringing this Motion is prejudicial to the Claimant as it arises so late in the hearing process. Up and until the Motion date, throughout all the proceedings (with no mention of it in the Procedural Order), only then came the Motion for Security for Costs.

52The jurisprudence indicates that such Motion should not be delayed until the last instance. While a mere delay in moving for a security may not be fatal to the Motion, the Tribunal has also examined the prejudice associated with the filing of the Motion in that the City had not even raised the spectre of such a Motion and it raises the question as to whether its intent is as the Claimant states "...an attempt to chill the proceeding irrespective of the fact that the Claimant's claim has merit..."

53Finally with regard to the claim itself, the Tribunal finds that the Claim is certainly not frivolous or vexatious in that the City expropriated the lands, made a Section 25 Offer to the Claimant and at this point in time all the evidence on the record demonstrates that a leasehold advantage is held by the Claimant, the outstanding matter being the valuation of same.

54While the Tribunal will not say that the Claim by the Claimant is a "slam dunk", it certainly is not frivolous, not vexatious, and not devoid of merit. In that respect the Tribunal is conscious of the danger of injustice arising from the possible prevention of a claim being able to proceed to trial.

55Accordingly, having regard to the fact that the Motion for Security of Costs was only brought by the City virtually at the eleventh hour, the fact that at this point in time in the proceedings the only evidence before the Tribunal is that there was a leasehold advantage to the Claimant arising from the expropriation, and that such a claim is not frivolous, not vexatious, not devoid of value, the Tribunal is not prepared to exercise its discretion and to order the Claimants to submit to security for costs at this stage.

56If the Tribunal were to make such an order it could potentially cause an injustice and the Tribunal will not do that.

57Costs are reserved to the Member who conducts the hearing on the merits.

"Blair S. Taylor"

BLAIR S. TAYLOR MEMBER

Ontario Land Tribunal Website: www.olt.gov.on.ca Telephone: 416-212-6349 Toll Free: 1-866-448-2248

The Conservation Review Board, the Environmental Review Tribunal, the Local Planning Appeal Tribunal and the Mining and Lands Tribunal are amalgamated and continued as the Ontario Land Tribunal ("Tribunal"). Any reference to the preceding tribunals or the former Ontario Municipal Board is deemed to be a reference to the Tribunal.